FINAL BILL REPORT

SHB 3002

                                  C 120 L 90

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Zellinsky, R. Meyers, Dellwo and Crane;by request of Insurance Commissioner)

Concerning solvency protection for health care service contractors.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

Health care service contractors must apply for and receive the insurance commissioner's permission before selling health coverage in Washington.  However, the insurance code does not require contractors to meet capital, surplus, or other minimum net worth standards as a condition of obtaining authority to conduct business.

Unlike health insurance companies, contractors do not agree to indemnify participants (policyholders) for costs incurred in obtaining health care services.  Rather, contractors enter into agreements with providers of health care who in turn agree to provide services to participants in the contractor's health plan.  The health care providers must obtain compensation for services from the contractor, not the participant using the services. Alternatively, if the participant obtains health care services from a provider who has not entered into a contract with the service contractor (a non-participating provider), the participant is directly liable for the costs of such health services.

To protect the participant in the event the contractor cannot reimburse the participant, the insurance code requires contractors to obtain insurance or deposit cash, bonds, or other securities with the commissioner to cover the participant's liability for health care services performed by a non-participating provider.  If the contractor becomes insolvent, this source of funds is available to pay claims for care rendered by non-participating providers.

In addition to the financial losses faced by a participant in a plan of an insolvent contractor, the participant must obtain coverage for health care services from another insurance company, contractor, or health maintenance organization.  Obtaining other coverage may be impossible if the participant has a health condition that is unacceptable to other companies.

SUMMARY:

Insurance code provisions governing health care service contractors are amended to provide new procedures and standards for the protection of consumers in the event of contractor insolvency.

Any rehabilitation, liquidation, or conservation of a health care service contractor must be conducted in accordance with procedures applicable to the rehabilitation, liquidation, or conservation of an insurance company.

Consumer participants of a health care service contractor are given the same priority to any assets of their insolvent contractor as is given to policyholders of an insolvent insurance company.  Participant liability for health care services rendered by a non-participating health care provider is treated as a participant claim against the contractor.

Health care service contractors must meet new net-worth standards and increased standards for deposits to protect participants from liability for health care services rendered by non-participating health care providers.

Participating health care providers are prohibited from maintaining an action against a participant to collect sums owed by the insolvent contractor.

If a contractor becomes insolvent, the other contractors and health maintenance organizations doing business in Washington must permit participants of the insolvent contractor to enroll in a health plan without proof of insurability.

A health care service contractor who offers only limited benefits is not required to offer greater benefits to persons covered by an insolvent contractor who offered broad benefits.

VOTES ON FINAL PASSAGE:

      House 95   0

      Senate    48     0 (Senate amended)

      House 93   0 (House concurred)

EFFECTIVE:June 7, 1990